R (Davies) v Financial Services Authority

The Court of Appeal dismissed an appeal against the refusal of permission for judicial review of warning notices issued by the Financial Services Authority under s 57 of the Financial Services and Markets Act 2000. The court held that the Authority was entitled to invoke its prohibition powers under s 56 in respect of past misconduct even where the disciplinary power under s 66 was time-barred, because there is no rigid punitive/preventive divide between those provisions and both serve regulatory objectives. The court also held that the applicants’ assertions that they had no present plans to work in the regulated sector did not prevent the Authority from issuing warning notices, and that the statutory scheme provides an alternative specialist remedy (the Tribunal) which usually makes judicial review a remedy of last resort.

Background and parties: The applicants were former employees of a London Metal Exchange member firm. Complaints about their conduct were investigated by the Securities and Futures Authority, which began proceedings in 2001. Those proceedings were discontinued when the Financial Services Authority (the Authority) acquired the regulatory jurisdiction. The Authority issued warning notices under s 57 of the Financial Services and Markets Act 2000 proposing prohibition orders under s 56.

Nature of the claim: The applicants applied for judicial review of the warning notices, contending that the Authority was improperly using the s 56 prohibition procedure to achieve disciplinary ends in respect of past misconduct that was time-barred from disciplinary action under s 66(4).

Issues framed:

• Whether the Authority’s use of s 56 to seek prohibition orders in respect of alleged past misconduct was ultra vires or an abuse of process because it circumvented the s 66 time limit;
• Whether the Authority was required to establish that the applicants intended to participate in regulated activities before issuing warning notices;
• Whether the applicants could rely on the Authority’s Handbook criteria and on an absence of present risk to justify injunctive relief by judicial review; and
• Whether judicial review was precluded as premature or inappropriate in the presence of a statutory alternative remedy before the Financial Services and Markets Tribunal.

Reasoning and outcome: The court agreed with the judge below that the grounds were unarguable. It rejected a strict punitive/preventive dichotomy between s 66 and s 56, observing that s 56 may properly be used to protect the public in respect of past misconduct. The applicants’ lack of present plans to return to regulated work did not prevent the Authority from issuing a warning notice; factual assertions about future intention were matters for representations to the Authority or, ultimately, for the Tribunal. The court emphasised that judicial review is a remedy of last resort where the Act provides a specialised procedure and tribunal; the applicants had not shown exceptional circumstances to depart from that principle. The appeal was dismissed and costs were ordered against the applicants.

Appeal dismissed. The Court of Appeal agreed with the judge below that the grounds for judicial review were unarguable. The Authority lawfully issued warning notices under s 57 and may invoke s 56 prohibition powers in relation to past misconduct even where disciplinary action under s 66 is time-barred; applicants’ assertions of no present intention to work in the industry do not bar the giving of warning notices; and the statutory Tribunal remedy ordinarily makes judicial review inappropriate absent exceptional circumstances.

This is an appeal from the Administrative Court decision of Lightman J refusing permission for judicial review (decision reported at [2003] 1 WLR 1284). Laws LJ granted permission to appeal to the Court of Appeal. The Court of Appeal (Mummery LJ, Carnwath LJ, Kennedy LJ) dismissed the appeal on 30 July 2003 ([2003] EWCA Civ 1128).